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Editors Note: Due to the mortgage and credit crunch, option arm mortgages are more difficult to get. If you’re in need of a Denver mortgage contact us to discuss your mortgage options.

Self-employed borrowers with inconsistent income Borrowers with inadequate or no retirement savings Borrowers who want cash reserves for emergencies Borrowers who need money to start or expand a business Borrowers who need mortgage payments to be as small as possible Borrowers who want to stop using high interest credit cards Borrowers seeking financial flexibility

The great thing about the Pay Option ARM is that it can benefit most people. Because of its flexibility, it can be catered to meet the needs and goals of most people. I personally like the Pay Option ARM because it gives me more cash flow on my rental property and I have more money to invest in other properties or investments.

However, it really needs to be conveyed that this loan is NOT meant for everyone. The Pay Option mortgage can have its down falls and if you are not the type of person who is very involved with their finances, you might want to consider a 3/1 or 5/1 Interest only ARM.

The pay option arm is a great alternative for those considering a Reverse Mortgage giving them a much lower payment option.

Pay Option ARMs are great for many borrowers. Another common situation is borrowers who own a rental property. The flexibility and minimum payments can be used to maximize cash flow from the property and or to off set additional expenses such as repairs.

Pay Option ARM is also referred to as a Pick a Payment loan. It gives the borrower the option to make one of four payment types every month, (1) minimum payment, (2) interest only payment, (3)payment based on 30 year amortizations, and (4) payment based on 15 year amortizations.

Benefits of refinancing your home loan: 

• For many people, refinancing their home can help them save a lot of money every month. There are two types of refinances. One is a cash-out refinance. This can be used to pull equity from your home, or to pay off debt. The other type of refinance is a rate and term refinance, where you change your interest rate or loan program.
• Many homeowners refinance to pay off their mortgage in shorter time with almost the same monthly payments. This is usually done by refinancing a 30-year mortgage with a new 15-year or 20-year mortgage with a lower interest rate.
• If you are refinancing to take cash out to pay off high interest credit cards, then the refinance is a benefit to you. The credit cards could take years to pay off, and the interest on the cards is not tax deductible. The mortgage interest on the other hand is tax deductible, saving you even more money than just your credit card monthly savings.
• Refinancing can benefit you if you need to get cash in order to do a remodel or any other home improvement. Refinancing your current mortgage could save you thousands of dollars in interest payments over other more expensive credit sources available.
• If you refinance to a lower interest rate you benefit from monthly cash savings. These monthly cash savings can be used to invest for your future further increasing the benefits of the refinance.
• You can also pull cash out of your home to use as a down payment on a property you plan to rent, which will usually reduce your interest rates when purchasing cash flow properties.
• Refinancing can also maximize the money that you are spending every month. If you are able to lower your term and keep your payment relatively close to what you are paying now, you will be accomplishing more for the same amount of money.
• Just remember that if you pull out more than $100,000 beyond what a home-improvement project costs you may not be able to deduct the interest on your taxes. Always consult a certified professional before making major decisions.

An ARM loan is where the interest rate is fixed for a specified period of time and then adjusts according to the terms of the loan and the index associated with the loan.

Adjustable Rate Mortgages are excellent choices for our customers with growing families, as the often outgrow their houses much before the fixed period of the mortgage expires.

One of the biggest advantages of an ARM loan is that when interest rates fall, the borrower can take advantage of those lower rates without having to go to the expense of refinancing.

An arm loan typically starts out w/ a lower rate than a fixed rate loan and can give you several years of reduced payments compared to a higher fixed rate mortgage.

The most common ARMs are 6 month, 1 yr, 2 yr, 3 yr, 5 yr, 7 yr and 10 yr.

ARM loans offer way more flexibility than your standard fixed rate mortgage. With ARM loans you can do fixed terms of usually 1, 3, 5,7 or 10 years. Most of these programs also give you an interest only option to lower your payments even more. Even though it has some negative aspects, the Pay Option ARM ( aka Pick a Payment, Cash flow ARM, Neg Am) is my favorite loan. This ARM gives you 3 or 4 monthly payment choices. The interest rate does fluctuate every month, but the minimum payment adjusts once a year and is usually based on paying only 1% of the interest due. This is ideal for investment properties, first time homebuyers, or borrowers savvy enough to divert the savings into other investments. Make sure to discuss all of the options with your mortgage broker.

ARM loans are typically best for people who know that they will either refinance or move within a few years. Because rates tend to be lower on ARM loans, this can be a very good choice. However, if you have no intention of moving within the next few years, you may be better off to go with a fixed rate mortgage. This is something you will want to discuss with your broker.

One of the myths in the mortgage business is that ARM loans are for those who don’t qualify for a fixed rate mortgage. The fact of the matter is that most ARM borrowers could also qualify for a fixed rate loan but choose an ARM because of the lower payments and other advantages that the ARM product offers.

Not all foreclosed properties are available at discount.

Do your research and do your home work when looking at foreclosures. Know the are you are buying in, find out what is a reasonable price for a similar home. Look at the property and bring some one else with you to be an objective observer. Write out lists of possible repairs, if you see anything suspicious have a specialist do an inspection.

Even though there has been a high amount of foreclosures in the nation, they have been touted as “easy money” by real estate investors trying to sell seminars more than real estate. Regardless of where the hype came from the demand is still perhaps more than the supply. For this reason banks have been able to sell their homes more and more at “market value.” For instance, Freddie Mac through Home Steps will actually renovate the homes themselves in order to make them available for full market value. Their goal is to sell them to “end users,” or people who plan on buying them as primary residences. In fact, HUD will only sell their homes to end users first, and then open the auction up to investors. Because of this, HUD auctions are flooded with investors, getting a bid in only after end users get a shot at them.

In most of the country’s “hot” real estate markets, competition for foreclosures and stagnation of pricing has made the spreads on foreclosure rehabs and flips significantly lower than before, thereby increasing the risks associated with buying foreclosures. Consider targeting a market which may be slightly off the beaten path where demand is increasing as part of your strategy, to help you diversify the risks of buying foreclosures in hot markets.

Doing your “due diligence” is key. It’s important to have a prelim title report done on the subject property(either by you or a 3rd party) to make sure there are no clouds on title.

The key to investing in foreclosures is to start early. Contact you local title company and have lists of NOD’s emailed to you. This will give you a starter list of homes that are facing foreclosure. If you have issues getting the list then contact a Real Estate professional you trust. They can get one for you.

Typically, competition for foreclosures is very high. Be sure to act quickly if you see a good opportunity.

There are high risks and hard work involved with buying foreclosure homes. A foreclosure property buyer needs to spend a great deal of time to find homes that are in foreclosure and to go through public records to make sure that the foreclosed properties do not have unexpected liens, such as tax liens, which could drive up the purchase price. Beginners should consider buying bank owned properties, which are often free from the usual risks associated with foreclosure homes.

Without a doubt to be successful in investing in foreclosures the investor must get to the homeowner early. Many serious foreclosure investors drive through otherwise well kept neighborhoods looking for homes in an unkempt condition. This can often (but of course not always) be a clue that the property is close to going into foreclosure.

You can use a simple formula to make sure that you have some cash flow or make money if buying a rehab project. You can take your after repaired value times 70% less repairs. (ARV x .70)-R = maximum offer. Obviously you can sway a bit from this depending on the area but this rule of thumb is used by professional real estate investors across the nation. You may want to contact contractors in your area to gain an understanding of what repairs costs. This formula takes into consideration your holding cost until you find a renter or buyer.

Editors Note: Due to the mortgage and credit crunch, option arm loans are more difficult to get. If you’re in need of a Denver home loans/mortgages contact us to discuss your mortgage options.

Pay option ARMS are not for every borrower but there are a few borrowers that can benefit from the Pay Option ARM mortgage programs available today. Self-Employed and Commissioned workers- With the flexible options in the Pay option programs these borrowers can adjust their monthly payments according to their monthly earnings. Borrower’s with high consumer debt– By lowering their mortgage payment these borrowers are able to pay of higher interest debt faster.

When considering whether to refinance into a Pay Option ARM, always keep in mind that Pay Option ARM can create negative amortization. Negative amortization occurs when a home owner makes the minimum monthly payments, which is less than the interest incurred, and end up owing more than what the homeowner owed originally. Most Pay Option ARM programs re-adjust the payments every year so that the loan balance would not be too much more than the original loan amount.

Ask your mortgage broker to review your situation and see if you could benefit from the pay option ARM programs. If a pay option ARM is not for you there may be better programs based on your situation.

Option Arms are a good choice for:-Increased cash flow on investment properties-Areas with high appreciation-Lower payments in order to invest and payoff debt-People who have unpredictable incomes.

Pay Option ARM’s are generally not meant to be programs that one stays with for long periods of time, such as 10 years or more. Pay Option ARM’s can incur negative amortization which means instead of your mortgage balance going down it actually increases. Most Pay Option ARM’s have a cap that will not allow the balance of your loan to increase higher than 115% of the appraised value of your home. Most also have a rate cap that states the rate can’t increase any higher than 9.95%. These numbers may vary slightly so check with your mortgage broker on the exact details of your loan program.

The Pay Option ARM gives you 4 “options” to make your payment.(1) The minimum payment.(2) Interest only payment.(3) 30 year fully amortizing payment.(4) 15 year fully amortizing payment

The pay option arm is also a great tool for seasonal workers. If you are a painter, and know that the majority of your income comes from the summer months, then you could adjust your payments to those months. You would be able to pay more on your mortgage while you are making more money, and pay less during the months that are typically slower for you. This would leave more cash in your hands during those slow months.

A Pay Option ARM is also a great tool for property investors. It gives you flexible payments that can help in months when the property is vacant, or in the event repairs are needed it can be used to offset the cost of repairs rather than using cash out of pocket.

If your household, like many in the US today, seems never to have enough cash every month and you find yourself constantly turning to credit cards or other expensive debt, this loan may be quite helpful. The Pay Option ARM can free up needed cash every month and help you avoid the other, more expensive kind of debt.

The Pay Option ARM is also a great way to pay down credit card debt, without laying out additional cash on a monthly basis. This method of managing your mortgage provides interest savings as well as it will usually provide some sizeable Tax savings.

Editors Note: Due to the mortgage and credit crunch, 100% investment property loans are no longer be available. If you’re in need of a mortgage broker in Denver, CO contact us to discuss your mortgage options.

If you are thinking about purchasing real estate for investment purposes, you need to keep these things in mind.

Investing in real estate requires a long term perspective on the liquidity of the investment, as long term returns are historically very strong, but short term markets are volatile as they are with all types of investments. Because deals are fundamentally land backed, the real estate investor can rest assured that financial services entities are ready and willing to step in and finance and insure the property, which results in much lower startup costs and very low downside risk by comparison to other traditional investments.

There are four possible financial benefits to investing in real estate:

• appreciation
• positive cash flow
• tax savings
• amortization of the mortgage

If you plan on taking negative cash flow, you should be sure that you will make it up in the other 3. Most investors today expect to get most of their return from appreciation by speculating on certain “hot” markets. Consequently, they are willing to accept little or no cash flow or more commonly, negative cash flow.

And another nice benefit of the option ARM loans are they have usually have 3 - 4 different payment options (hence the name pay option ARM). They have a minimum payment, interest only and 2 different amortization payments to choose from each month. The minimum payment can be utilized for vacancies on rental properties.

Interest rates on investment properties are higher versus those of a primary residence because they present a higher risk. A borrower is more likely to worry about his own mortgage first if he gets into a financial jam.

It is possible to qualify for 100% investor loans to get you started in the real estate investment career. The rates are quite high, but if you choose the correct property you will be well on your way to success as an investor.

Real estate investing has always been a great investment vehicle when used correctly. Some of the best neighborhoods to buy rentals in are the blue collar neighborhoods. The ratio of mortgage payment to rental income seem to be best in these types of neighborhood. You may also want to consider keeping a small amount of money equal to 3 months of mortgage payments in an account readily available for vacancies when someone moves out. The faster you get your property rented the more money you get to keep.

A Pay Option ARM is a great mortgage for the property investor. It allows flexibility in your payments to offset possible costs associated with rental units, such as vacancy and repairs. It also can maximize the cash flow from a rental property.

Always remember to figure money in for emergency repairs and routine upkeep. If you cannot afford to maintain your property then you will eventually lose money. The pay option ARMS now available are great for payment flexibility if any major repairs should arise.

Over the long term, real estate has traditionally out performed many other investment vehicles such as stocks and bonds. However, as in stocks there is a significant difference in risk factor between long term investing and short term quick for profit flipping.

Editors Note: Due to the mortgage and credit crunch, loans for second homes and vacation homes are available but qualifying has become more difficult. If you’re in need of one of these mortgages in Denver contact us to discuss your mortgage options.

2005 was one of the hottest years on record for people buying second homes with over 21% of all purchases being second homes. Driving this trend is the availability of capital for baby boomers from harvesting the swelling equity from primary residences as home values soared over the last few years. Some areas like Destin, Florida averaged over 25% appreciation in 2005 alone. Hot areas are, as suspected, homes near the beach, like the Destin area, mountains and other recreation areas. According to the National Association of Realtors, for markets where over 10% of the homes are seasonal, there was a 59% increase in value from 2001 to 2004.Also helping in the growth is the publicity given to the real estate investment industry with infomercials like Carlton Sheets focusing on the low down payments required. In some cases 5% or less is all that is required to get you interest rates that rival those for primary residences. Lastly the popularity of low payment loans like the interest only and cash flow option arm have joined the low down payment programs so that the homes are cheaper to get into and cheaper to hold, at least on the short term. Also helping in the growth is the publicity given to the real estate investment industry with infomercials like Carlton Sheets focusing on the low down payments required. In some cases 5% or less is all that is required to get you an interest rates that rival those for primary residences. Lastly the popularity of low payment loans like the interest only and cash flow option arm have joined the low down payment programs so that the homes are cheaper to get into and cheaper to hold, at least on the short term.

To be considered a 2nd home you are not allowed to own more than two second/vacation properties. Any more than two second/vacation properties and you may have to consider it an investment property.

Often the lender will lend a lower LTV on a second home vs. a primary residence.

You may be asking yourself why real estate is such a good investment. Let’s look and see why it is such a good investment. You average home’s appreciation rate is around 5% per year. The numbers look like this: Year 1 - 100,000 home value when you buy Year 2 - 105,000Year 3 - 110,250Year 4 - 115,762Year 5 = 121,550As you can see it doesn’t take long to build up some equity in your house. If you bought a 200K home then those numbers would be double. This example is not even taking in into account that you are paying down the principle balance on your loan. If you have your home on an interest only or pay option loan then you are probably cash flowing each and every month too.

Option ARMs are excellent tools for investors seeking rental income, particularly on seasonal properties. You have the option to keep your payments low when the property is empty, and manage your cash flow while the property is booked or rented.

Keep in mind that if it is a second home or investment property, there may be loan to value restrictions.

Some of the factors that lenders look at when qualifying a home as a “second home” are:1. Distance from primary residence2. Location3. Is the home being used for “personal” use

The first step for obtaining a second home is to speak with your mortgage broker and discuss financing options and determine the amount of money you can affords to spend. Be sure to remember the added maintenance costs of a second home, a lot of routine work needs to be done to maintain it and keep it in enjoyable condition. This may be work that you may not be able to do yourself do to distance or time limitations.

If the property that you are buying is for the purpose of a legitimate vacation or second home, many lenders offer loan terms that are comparable to those offered on a primary residence. To qualify, the lender will need to be comfortable that the property is being used as a second home, not as investment (rental) property.

Lenders offer more favorable terms on second homes than investment properties. Underwriters will want to know for sure if the home is being used as a second home or as an investment property. Most people purchase second homes in resort areas for vacation purposes or near relatives and family members.

Lending banks post more stringent underwriting requirements for second homes and vacation homes, because if the homeowner should suffer a financial crisis, he would almost always first default on the vacation home and try to save the primary residence. In addition to ensuring that the homeowner is able to afford payments for both the primary and the second home, most banks also require higher down payment for the second residence.

Editors Note: Due to the mortgage and credit crunch, investment property loans may be harder to obtain. If you’re in need of a Denver, Colorado Mortgage contact us to discuss your mortgage options.

Acquiring investment properties has become much more simplified in regards to the financing options available. Today’s mortgage programs can allow you up to 100% financing of your investment property. There are several different loan options available that are set up to maximize your cash flow.

Loans for investment properties are generally much more risky than owner occupied homes. To offset this risk the lender may require a higher down payment and a slightly higher interest rate. Also, if the investment property will be income producing then the lender will restrict how much of this income can be used towards loan qualification. Ask your preferred mortgage professional about the implications of buying an investment property with a mortgage.

Investment loans are so flexible they are allowing many investors to get into the game. It is a good idea to speak to your Mortgage Broker to see how we can get you an investment loan also!

The flexibility of a pay option ARM is also a useful tool to investment property owners. Several of my borrowers us this loan not to increase cash flow, but to maximize the use of the rental income. While the property is rented they make the highest payment they can with just the rent, when the property is vacant between renters they utilize the minimum payment so there out of pocket expense is minimized. Investment property owners can also utilize the minimum payments if repairs are needed, etc. The minimum payment can off set the out of pocket expense of repairs and maintenance

Although it may seem like easy money, making money in real estate investing is a skill that takes research and experience to acquire. It requires a good plan and an understanding of the processes involved to either rehab a home or renting to tenants. Make sure you do your research and understand what you are undertaking. The last thing you want to do is put yourself into a situation where the property you buy costs you money every month.

In the world of real estate investing, a property that generates monthly cash inflow is always considered a sound investment. To create a positive cash flow situation, investors often prefer “interest only” mortgage products, which requires the homeowner to make monthly payments on only the interest accrued for the prior month. Because “interest only” payments are always lower than fully amortized payments, investors have a better chance of creating a monthly cash inflow.

If you are purchasing a home that is in a state of disrepair, you may want to look at a renovation or rehabilitation loan. Lenders will loan on investment properties up to 90% of the after repaired value. Monies are given out on a draw schedule similar to a construction loan. Investors find these types of loans favorable due to not having to pay for repairs and remodeling out of pocket.

A Pay Option ARM and an interest only loan are great choices for mortgages on your investment properties. These will allow you to have the lowest payments possible to help you utilize your cash flow to its fullest potential. There are many more loan programs now for investment properties than there were a while back. You will generally pay a somewhat higher rate on an investment property than you would on an owner occupied property due to the higher risk involved to the lender.

A loan officer is a mortgage professional who assists with originating a mortgage loan for a borrower. A loan officer will help a borrower to identify their needs, select a loan program, complete the application process, offer advice and answer any questions a borrower may have.

Loan officers may work for either a bank or a broker. Both have similar jobs, but their products are very different. Loan officers who work for banks only have access to the loan programs that the bank offers, while loan officers who work for brokers have access to all of the loan programs from many different lenders. In fact, many brokers work with hundreds of lenders nationwide.

Many loan officers specialize in specific types of transactions. Make sure you either select a loan officer who specializes in helping clients with transactions such as yours; or a loan officer who at least does not specialize in transaction types not related to your loan type.

A loan officer works with borrowers to help them choose the right loan program. The loan officer then helps the buyer complete loan application and required disclosures to apply for their particular loan program. The loan officer also acts as the liaison for the lender and buyer during the process to help get the loan closed in a timely manner.

A good loan officer not only is knowledgeable, but is professional. They return phone calls promptly, and do the research necessary to ensure the borrower gets all their questions answered correctly. An un-researched answer could cause serious delays later on, or worse cause the loan application to be denied altogether. A good loan officer knows how to preempt future problems and prepare for it.

When looking for a loan officer to handle your mortgage transaction you should look for a loan officer that is someone you feel comfortable with and can trust, is professional, is knowledgeable, and is reliable. A mortgage is one of the biggest investments in most people’s lives and you should feel comfortable and secure with the person you decide to work with.

When interviewing a loan officer who will assist you in a major financial transaction choose one who is knowledgeable, professional, organized, efficient and who gives you a sense of trust and comfort.

One thing that the Loan Officer does not do is decide what documentation that you will need or what conditions your loan approval are based upon. On rare occasions, the Loan Officer may negotiate with the underwriter if there are conditions that seem unfair or you are unable to meet. Generally speaking though, the underwriter will decide what conditions apply and the Loan Officer and you as the borrower must comply in order to complete the loan process.

A mortgage broker has many more programs than loan officer at a bank. Brokers are able to offer more products that will help you get the loan you want to achieve your financial goals. Brokers are especially good when it comes to buying investment properties because of they offer more programs that can help the property cash flow.

With the recent advance technology development in the mortgage industry, loan officers can now get a loan approval from banks in a matter of minutes, making the role loan officers play ever more important to homebuyers. A knowledgeable loan officer is the first person in the loan process who can tell whether a loan application is likely to be approved or declined, even before the application is submitted to a bank underwriter. The loan officer can then advise on how to improve the likelihood of getting the application approved, before it is declined by lenders.

A loan officer normally works directly for a broker, whom is licensed. In some States the LO is also required to be licensed. You should check with your LO to ensure he is licensed if required.

Loan Officers are a valuable resource, and have your best interests in mind.

Other sites: Mortgage Broker | 1003 The Loan Application | Protect Yourself from the Real Estate Bubble | Negative Amortization | MIP | Selling your home with a real estate agent | Delinquency | Quick Closing | Fixed-rate mortgage | Stated Income Loan | Tips for lowering your homeowners insurance| Pay Option Arm Calculator

Editors Note: Due to the mortgage and credit crunch, 100% investment property loans are no longer be available. If you’re in need of a Denver, CO mortgage contact us to discuss your mortgage options.

Investor Loans are also commonly referred to a non owner occupied mortgages. These loans generally have higher interest rates due to the fact that the loan is higher risk to the lender.

There are many 100% investor loan programs, down to a 620 score.. Or if you get creative, with seller held seconds down into the 500’s…

Most lenders have limitations on how many properties they will finance for one investor and how many investment (NOO) properties can be owned by one investor. Please consult with your Broker, to match your specific needs, with the right lenders.

Many borrowers have trouble understanding why loans to investors are considered riskier than loans to occupant homeowners. The fact is that the default rate on small investor loans is significantly higher than that of their owner occupied counterparts. The common scenario is that the investor is unable find a tenant for the property. Without the tenant’s income (rent) the investor is unable to make the mortgage payments. The investor is usually not as concerned about losing the property through foreclosure because it does not take away the “roof over his head”.

When it comes to investors mortgages, most real estate investors prefer loans with the lowest monthly payments. Adjustable rate mortgages, interest only mortgages, and hybrid mortgages often have lower starting rates, and therefore lower monthly payments than their fixed rate counterparts, at least for the first few years. Investors prefer mortgages with low monthly payments because a real estate investment is said to be a sound investment if it produces a monthly cash inflow.

Investor loans are my specialty. I have developed extensive knowledge of the underwriting requirements of these products. For experienced investors, there are depreciation and expense treatment methods which improve your ratios. For new investors, there are programs allowing investment in real estate with lower down payment requirements.

Its tough to get a high amount of financing on investor loans. The banks limit you on the financing you can get.

You may not have as many options on investor loans as you would with a convention loan on your primary residence. Along with a higher rate, you may encounter higher fees and closing costs.

Even though investor loans may carry higher interest rates than owner occupied loans, there are still programs that can allow investors to maximize cash flow.

One of the reasons that lenders consider investment mortgages to have higher risk is the fact that the borrower will not be forced to move if he/she defaults on the mortgage. Borrowers who’s mortgage is associated with their primary residence are more likely to pay, since they don’t want to be evicted due to default.

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